A Unique Forex Position Strategy

This Forex position strategy is a simple example of how you can increase your position size without increasing your risk. Particularly effective with mini lots, this strategy for averaging into a position also works great for regular lots.

The name of the game in currency trading is to limit your risk. The example below is simplified for instructional purposes, but I'm sure you'll understand the concept.

The chart below is to illustrate how you can increase your position size while minimizing the overall risk. This particular example uses mini-lots and the bid/ask spread has been omitted for simplicity.

To understand the chart, we need to go over each step...

Step 1 - We buy one mini-lot of EUR/USD at 1.3100 and set the stop loss at 1.3080. As you can see from the chart, our risk is $20.

Step 2 - The price rises and we buy a second mini-lot at 1.3120, set it's stop at 1.3100 and raise the stop of our first lot to 1.3100 also. Now we have two lots and our overall risk is still only $20.

Step 3 - Our price is still rising and we buy a third lot at 1.3140, set it's stop at 1.3120 and raise the stop of our first two lots also to 1.3120. This locks in a profit for our first lot and ensures the worst case in this whole trade is a break even.

Step 4 - Life is good, prices still are rising and we buy a forth lot at 1.3160 and set it's stop at 1.3140. We raise the stop on the first three lots also to 1.3140, protecting our profit.

Step 5 - We buy our fifth lot, set the stops as before and lock in a nice $100 profit. The best part is at no time during this example was our risk more than $20.

The figures used here are simplified and are only to show an example of how this method can be used to average into a position.

Techniques such as this Forex position strategy are good for limiting your risk exposure, which is something you should always strive for.

You can use a similar method to average out of your trades. Keep an eye on the indicators and if they are showing signs of hitting their limits, don't be afraid to take a partial profit rather than waiting for a correction. Don't let greed override your common sense.

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